Data is Money

When I use Google Search, I don’t pay anything. I get a great service but I don’t pay them cash for it.

There’s a popular expression now: “if you’re not paying for it you are not the customer. You are the product.”  I like this expression, because it captures the way I feel about the Google and Facebook (GAF) business model. But while I like it, I no longer agree with it, because it’s not an accurate picture of my relationship with GAF. I am a customer, and I do pay for their services. I just happen to pay in data, instead of dollars.

Data Is Money

Data is now a currency. With data I can buy thousands of apps on the Apple App Store. I can search the web, the world’s academic journals, and millions of photos of cats doing funny things. I can send and receive email. It’s the business model of the Internet, and it has its limitations, but nevertheless it is here.

Data is money. In exchange for creating, and then transferring data to GAF, they give me a web service. Both companies specialise in aggregating all that data and selling it for dollars to advertisers. In effect, there is a data to dollars exchange rate (and, you’ll note, a dollar to data one too).

Data is Money. Not like money, or as good as money. It is money.

Anthony, Brazen Thoughts, 2012

It is money because it is a medium of exchange, a unit of account, and a store of value. Currently, organisations that have a lot of it either “mine” it for information that can be used to design better products or services, or package it directly for sale in another form of currency (eg dollars).

Where it might get interesting is when we start asking to be paid in data directly, instead of in dollars first. There’s an example of a musician, asking to be paid in data, instead of the measly fractions of cents she gets as a cut from iTunes. It’s not that big a stretch to imagine a supermarket where I pay for my groceries in personal data (making Woolworths an advertising platform, as well as a supermarket. They’re halfway there already).

This doesn’t necessarily lead to a world where “everyone is an advertiser” however. The advertising business model exists because we haven’t yet thought of any other way to convert data to dollars, which we want to do, because we need dollars for food. But if we had even one farmer who was willing to supply food in exchange for data…

Now, all we need is a trusted record of exchange of data. I wonder if anyone is working on that?

First Data Bank

Here’s an idea I’d like to see: a data bank.

You “deposit” your data in a bank. You can withdraw it, which means it’s deleted. You can add to it at any time. You can deposit any kind of data you want, and transfer it to other accounts if you choose. The data is yours, in the same sense that money in a bank is “yours”.

The bank “loans” data to borrowers, under strict terms (in essence, the bank doesn’t need to physically transfer anything, or even give direct access to the data… but I digress). The borrowers have that data on loan, and must pay “interest.” The interest takes the form of the insights that they gain from analysing that data. The insights flow back to the data bank, and ultimately the data depositors.

This is a very different business model to GAF.

Money is Data

Money, by the way, is data. This is where I actually started, but I decided to lead this blog post with the conclusion rather than the introduction.

Money is an act of collective imagination. A mass, mutual suspension of disbelief. Money has value because we all believe it has value. This is easy for us, because our government says it’s true, and everyone is acting as if it is. Fairly catastrophic things happen to societies when people stop believing that their money still holds value (or that it will in the future). We call these catastrophic things hyper-inflation, and the collapse of civilisation.

While we have physical manifestations that represent money (coins, notes, bearer bonds, etc), most of our money these days exists purely as data recorded on bank computers. I rarely think about it, but I go about my day secure in the belief that the money in my account is “real.” But it’s not physically real. There’s no vault, no physical ledger, no gold or cash. It’s just flipped bits on a platter in a private cloud.

To access our money, we often use “money avatars”, such as credit & debit cards, gift cards, or cheques. They are avatars in the sense that they are physical manifestations that represent something imaginary, an intangible value. The bank note is not the thing, it just represents the thing. Its value is based on a promise we all beleive will be kept. The item itself is near-worthless paper.

Modern avatars pop up in other places too. Service avatars are physical manifestations of intangible service value. My iPhone is a service avatar. The true value of the iPhone is in the intangible apps. My Kindle is a service avatar (“The Kindle is not a product. It is a service” – Bezos).

Maybe I’m just a data avatar. 🙂

TL;DR: Conclusion

Money is data, but more interestingly, data is money. In exactly the same way as a fiat currency, data has an irrational but reliable intangible value and is used in exchange for services.

Could be really interesting times ahead.

Postscript

 

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Google is not Crazy

Google is not Crazy

Last month, the New York Times ran an article which raised some questions about Google’s recent acquisitions and how they fit in with its larger strategy. Some analysts see Google’s acquisition of Nest in a positive light, however, the article noted, not everyone is convinced:

Colin Gillis of BGC Partners is more sceptical. “Do you trust Google’s management as visionaries?” he asked. The analyst questioned the Nest purchase. Making thermostats does not fit in with Google’s core advertising, he said. Neither does robotics.

In my view, this is not necessarily correct. Here’s why.

Google’s Vision vs Business Model

Google defines it’s mission as: “[…] to organize the world’s information and make it universally accessible and useful.” Their pursuit of this mission is clearly seen in Google Search, but also its academic publications search, e-mail, social, scanned books, and other services. It’s perhaps harder to see that mission in driverless cars and “thermostats” (assuming that’s what Nest’s business really is). Nevertheless, I think the mission is still there. But today I want to talk about Google’s business model. In terms as simple as its mission, what would you say Google’s Business Model is? Here’s my take:

Sell precisely targeted advertising.

The mission and the business model are not the same. That’s OK, they shouldn’t be the same. The role of the business model is to support the mission. Google’s business model is deceptively simple. Yes, they sell advertising. However for Google (and Facebook, and maybe Twitter), the point is that the advertising is precisely targeted, because of Google’s access to consumer intent through its search engine, Gmail, Google+ and other services.

Limits to Google’s Business Model

There is, however, a limitation to this business model. It is this: Most of what we do in our lives we do “offline” to Google. Most people, most of the time, buy products in physical stores. We drive cars, catch trains, visit friends & family and we do these things without necessarily letting Google know about it. If your business model was to sell precisely targeted advertising, and you realised that most consumer activity was actually happening without you knowing about it, what would you do?

Intermediation Model 2.0

What Google wants to do is intermediate our lives. A lot has been written about dis-intermediation as being the defining feature of the current change sweeping the business world. But it would be more accurately described as re-intermediation. In the past, newspapers aggregated consumer eyeballs and then sold those to advertisers. Then they got dis-intermediated (and unbundled, and out manoeuvred, and et hoc genus omne). But that hasn’t meant that you get your news directly from journalists. Rather, you get it from the new aggregators and intermediaries: Google, Facebook, and Twitter.

Similarly, Amazon disrupted the book retailing market, and with its Kindle service, is now in the position to cut out the publishers completely. But again, it hasn’t meant that you buy your books directly from authors. You buy them from the new intermediaries: Amazon, Apple, and Google. Google is in the intermediation business. By learning everything it possibly can about us, it’s able to sell very precisely targeted advertising, and effectively mediate consumer access to service providers. And it can make a lot of money doing it.[1]

Google is not “Predicting the Future.”

Let’s revisit the analyst’s reservations about Google:

“Do you trust Google’s management as visionaries?” […] Making thermostats does not fit in with Google’s core advertising [business]. Neither does robotics.

Except, yes they do. They fit because Google’s advertising is precisely targeted based on what it knows about us. What do you think a home thermostat connected to the Internet could tell Google about the people who lived there?

What correlations might Google discover between thermostat settings and, say, disposable income? What happens when the Nest product suite branches out to gather more than just temperature data? What about noise levels? Movement? Air quality? Could a Nest sensor infer the emotional state of a household based on voice intonations? Could it infer what people are watching or listening to based on background noise? Imagine having Shazam running all the time, only it identified more than just music but also news stories, movies, TV shows… Might that be interesting to an “advertising” company?

What could a self-driving car tell Google about where people went, and how often they went there? Would the car see interesting events on its travels? What would it hear people inside talk about? Do you think it might want to talk back? What would it say? Anything here interesting to an “advertising” company?

What about robots generally? Who will the robots work for and what will they do? If we delegated service consumption to an automated system that worked for us, would a company that wants to mediate your consumption of services want to know about it? Robotics is key for Google because it offers the potential for Google to break free of the digital interface straight-jacket that is mobile and desktop computing. The robot will be the new service interface. Does anyone really doubt that owning a slice of the new service interface wouldn’t make any company salivate?

Summary

TL;DR?

  • Google is not in the “advertising” business as traditionally described. It is in the business of service intermediation. They are one of the new service intermediaries.
  • The service intermediation business requires advertising that is precisely targeted for its advertiser customers to get real value. This targeting requires large volumes of data about the target consumers. Google is missing data about our “real-world” interactions, and sensor companies like Nest can fix that for them.
  • The (automated) service interfaces of the future are not the screens and keyboards we know today. “Online services” is going to break out of the constraints of mobile and desktop computing and into the physical world via “robots” and other automated services that can manipulate their physical environment.

Google will be able to learn more, and then mediate our service acquisition, in more places and more often. So no, Mr Analyst who asked a rhetorical question that I will answer anyway: No I don’t think Google’s founders are visionary. I think they are lucky to be where they are, and they’re following up that advantage with some very canny business development.

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This is what Jason Fried of 37signals did when he gave his company a month to work on projects of their own choosing.

Sounds radical at first thought but if you have dedicated passionate people it makes a lot of sense. It’s the staff involved in the day to day running and building of your business that are most likely to know what your business needs. Fried has given them an opportunity to demonstrate what’s needed and the solutions to those needs.

How can you afford to do this? How can you afford not to? Argues Fried: “We would never have had such a burst of creative energy had we stuck to business as usual.”

Jason Fried – Why I gave my company a month off

Wonderful short video on how to be a Product Owner – should be required viewing for all PO’s and similarly essential viewing for anyone that’s trying to understand the principles of Agile. Captured in this video is the essence of Agile product development. Watch it once and if you don’t understand it all, watch it again. But most importantly, if you are a Product Owner, note the parts about working closely with the team.